Guest Post: What's Your Favorite "On the Ground" Recession Indicator?

Beautifully maintained trophy cars are being dumped for cash. What does that say about the "real" economy?

Everybody has their own "on the ground" recession indicators: the mall parking lot, the tony restaurant that used to be packed every weekend, and so on.

I have two favorites: freight trains rumbling south down the main line of the West Coast and "sell your own car" used car lots.

The freight trains are self-explanatory: at the top of the housing bubble, they were loaded with flatcars of lumber. Now? A lot of empty flatcars and container flats. A lot. Yes, the official statistics indicate rising rail traffic, but they must mean one more car has a load in a 100-car train and there's only 20 empties. The freight trains I see are still running with beaucoup empty cars.

There may be some explanation of why this is so, but I can report that these trains pulled no empties in 2007.

"Sell your own car" lots reflect the "private market" for used cars. If you want to know what people are trading in for new cars, then go look at new car dealers' used lots. At the local Honda dealer, I saw a number of Lexus SUVs on their used lot; people trading down to save on gasoline?

I've sold a few cars myself at the local "sell your own car" lot, so I know it's reputable and a model that works for buyers and sellers. For a flat fee, you park your car on their lot and price it however you want. Potential buyers get to test-drive it, take it to their mechanic, etc. It's a big lot, so the selection of cars and prices is suggestive of larger trends--at least to me.

Back in 2009 at the initial depths of the recession, the used Toyotas and Hondas vanished and the lot filled with Volvos and other big-car-payment brands. I took this to reflect people were ditching their car payments and snapping up older reliable cars they could buy for cash and get another 100,000 miles out of.

I hadn't been by the lot in a while and what I saw astonished me. The lot was packed with "fun" cars and luxury brands: four recent-vintage Cooper-Minis were lined up (none sold in the week I monitored the lot). A cute yellow VW Beetle--another "fun" car-- was over by the Mercedes. Yes, Mercedes, and Porsches, all beautfully maintained.

For the first time in the two decades I've scanned this lot, it was chockful of luxury cars: a pristine black 2002 Porsche Boxter with low mileage that raised my blood pressure and sorely tempted me because it was "priced to sell"--and for a Scots-Irish-French tightwad, that's saying something; an equally beautiful Mercedes 500-series two seater, low mileage, brand-new in appearance; a fairly decent Jaguar; another pristine 300-series Mercedes, a classic, unbelievably well-maintained Porsche 911 (1991)-- the list goes on.

In the good old days, these "still look new" luxury cars would have been snapped up at these prices. But now they sit here, unsold, day after day.

Another class of "fun" car was also represented--the muscle car: a very clean recent vintage red Trans Am attracted onlookers in one corner of the lot.

Sellers can add comments to the sales tag, and on at least two of the luxury vehicles it was noted that the car had been their father's, one owner. Others indicated the original owner was selling.

If you know some car buffs, or you are one, then you know what these low-mileage super-clean luxury cars represent: they represent the lifetime achievement car for a guy, or the trophy car the rising exec takes out on the weekend. There is no other explanation for a 10-year old car to have 17,000 miles, or 33,000 miles--they were all garaged and enjoyed as a third or fourth car.

It seems Dad is getting too old to drive, or it's no longer feasible to ease into the low-slung Porsche, and so he's given it to one of his kids. And the kid drove it to the lot to turn into cold hard cash.

As for the "fun" cars: maybe they're still selling big numbers of new vehicles, but the glow of owning a mediocre-mileage car with no room for the dog or kids seems to be fading for existing owners. My sister-in-law spent a fortune having her Mini Cooper fixed last year, and our friend with a cutsy VW Beetle had a repair bill after a few years of ownership that could have bought a decent used car instead.

For whatever reason, "fun" cars that I never saw on the lot before are now there in abundance.

This is all anecdotal, of course, and wide open to interpretation. If you go to the techie-hipster favored neighborhoods in San Francisco, the tony cafes and restaurants are crowded: there's plenty of Web 2.0 money floating around. If you only look at these concentrations of talent and free-flowing investment capital, the economy looks like it's booming. Ditto if you try to book a table near the Opera on performance night: there's plenty of old money around that can spend $100 per dinner, too.

Once again, there were no older Toyotas or Hondas on the lot, only a few 2-year old models asking near-new prices. I interpret this thusly: older reliable cars that will last another five years without major expense are snapped up immediately, and superfluous "fun" cars and luxury trophy vehicles are being turned into cash.

When people are driving their pride and joy cars out of their pampered garages and selling them for cash, not trading them in for a new car or keeping them for pleasure, I think that's saying something about the "real" economy you won't find if you hang around Twitter HQ or the bejeweled Opera crowd.

You may intepret it differently, of course. That's the beauty of "on the ground" recession indicators.

CNN article about "Local Currencies" being used to pay for health services caught my attention the other day. Its getting more difficult to juggle those Obama wins by a ;andslide faux polls with the need to make money in reality.

Recession Indicator? Toll Booth operators on Turnpike telling me they are ready for a revolution.

Absolutely. My brother works for Seagrams. He told me that people won't buy a new car in a recession, but the industry knows they will buy a $100 bottle of tequilla. They had a word for it, something like "comfort luxeries" or something. The theory goes that people will spend ridiculous amounts on booze during bad times because it makes them feel better. Their most expensive lines of booze are doing the best, so I guess that validates the theory.

Also, alcohol related misconduct is up six fold within my company. It has to be the economy.

Go to Walmart (the largest grocery seller in America) tonight at midnight (or most of the day tomorrow) after the EBT cards of 46 million Americans get refilled. The hidden "soup lines" of the first Great Depression during the second Greater Depression.

Spot on. This is a well known phenomenon with all kinds of comfort foods. For instance, chocolate sales have very strong negative correlation with real economic indicators (not the fake ones everybody uses these days though). People skip bigger purchases and instead have a cozy night at home on their couch and comfort themselves with chocolate or primo booze. The correlation is particularly strong for high grade stuff like you mentioned with the $100 tequila. Swiss and Belgian chocolates sell like hotcakes during recessions.

Real beer doesn't have sugar as an igredient. I'm probably drinking high fructose corn syrup too; my paw in law always suggested getting the brew that "popped your cork". He lived a frugal and pretty happy life.

Fuck Pabst Blue Ribbon. My friend bought his 92 year old mother a 40 of King Cobra and she liked it. She typically drinks whiskey and water, but in these hard times you gotta do what you gotta do to cut costs.

In south lake tahoe which is having the worst snow I have ever seen in over 20 years right now PBR is like an Icon. I think every joint around sells PBR cans for a buck.. All the kids drinking it on the lifts..Shit is garbage.. I did like it when they were serving the Olympias as an alternative though

Pretty fucking hard to get SSD. Initial filing is denied in most of the cases, unless it is mental illness. Then there is, at minimum, a year wait for a court date. Menwhile you need to not only have your doctors say you are eligible but also the testing doctors.

I'm really question that get on right away claim you made.

And to be successful you need an attorney who will claim a quarter of your back pay. Plus they get paid first before you see a cent, paid directly from the court (close enough).

But I am starting to wonder if the states are throwing people from Social Services to SSI.

I have been told by hospital case managers that the benefit for SSDI has been increased to $1800/month, still trying to confirm primarily.

Gully,

Not sure what lawyers in your area are charging, here it is a flat fee around $4k. No more need to wonder about the states moving people to SSDI, the SSI offices have quotas, probably a handshake agree with Federal gov't to help bail out, errr, support individual states, just like with Food stamps.

Sounds like you have no clue! Look at your S.S. statement and it will tell you, if you made max over 5 of the last 10 yrs your benifit is 1.4 k . I don't think you can live very well on that. You can have it, I couldn't live on that!

The amount a recipient sees depends upon their work record, just like regular SSI. The vast majority of people I've worked with over the years--mentally or physically disabled lower working class folks--get less than $700 a month.

My ex-wife has been on ssi since 2005 I believe. She gets $1300 per month for herself, and $350 per month for each of our two children. And she's allowed to earn up to $10K per year without affecting her disability income. She was initially denied, then hired an attorney on contingency. The case took almost two years, but the payment was retroactive to the original filing date so the intitial payment was significant, even after the attorney took his fees. If I remember correctly, the attorney fees are capped by SS, so it's not like it was 33% or something. I think it was around $4500. She's been told that once you've been approved for disability, you'll be on it for life. Her issues are related to depression and some back problems, but I'm sure she could probably work if starvation was the alternative.

I might add that my attorney spent all of 20 minutes with me for that, wrote one letter, and bingo 2.7 years later PAYDAY for him. SS just sort of automatically rejects all but the most obvious claims, but when years later I got an appeal hearing the judge interrupted me after ten minutes of telling my side of the story and was flabbergasted that I had ever been denied. She summarily ruled in my favor.

I originally applied in 1991 and same thing, they rejected my claim practically while I was still standing at the counter to turn it in. I had a letter informing me of my appeal rights within three days. So I go in to file an appeal but back then the policy was that SS would not consider any records from the veterans administration, so if you were a disabled vet it was almost 100% likely your only medical evidence would be from the VA which they would not even look at. Pretty cool eh? Functionally denying any and all veterans claims that were military related. And you wonder why veterans were homeless in mass numbers? A judge put an end to that in 2002 though, now they have to consider all evidence you can produce.

But back in 1991 when I went to file the appeal from my original claim they told me it was a waste of time don't bother because I already had a vet disability of $897 per month and so my net from SS even if I were to win would only be about $6 per month. So, I did not appeal that 1991 ruling. But when the judge ruled SS had to consider VA records it was not retroactive, it only allowed you to re file with back pay to that day of refiling.

The largest expanding company in my state has their signs all over the place on factories and businesses they've acquired. They are doing great. I can't find their stock symbo however. Anyone here familiar with "Now Leasing"? (humor).

I ski Squaw too. I work the race dept as a volunteer and I actually just started asking many of the guys how they were doing as I met up with old friends. Nearly everyone said things were the shits and these are pretty varied group of independent types, real estate etc. Reno has been slammed hard and so has Tahoe. Squaw laid off 2/3 of their force over Xmas with no snow, though they had a good year last year due to the low pass prices. This is a tough gauge as the seaon looses momentum with no snow. I expect weekends will be a bit better. People who come from out of the area will go where the snow is or maybe have cancelled. Weather plays a big role.

My favorite recession indicators are toilet paper and cereal packages. The toilet paper rolls are now 3/4" narrower and cereal packages have become very thin. Also, here in Southern California we are sending delegations to Mexico to attract investments.

Stuck, you just reminded me of an incident a couple months ago that pissed me off along those lines. I opened a two liter bottle of Refresh Lemon Lime soda (Safeway house brand version of 7UP) I went to tip the bottle to pour into a glass but the bottle was so thin and weak it bent in half at the middle and soda went all over the countertop. Not only was half wasted but I had a big mess to clean up, now I try to remember to support them like I am holding a baby. Any thinner and they will be like mylar bags of pop.

My indicator is when surveyors don't get called out from the union hall. No surveying, no construction. So far they have been sitting in the hall for 5 years. Operating Engineers, Local 12 Southern California

I've been a land surveyor for over a decade and have worked >250 hours for the entirety of 2011......recently started work as a travelling pipeline surveyor just to keep the farm. The Hill (through the DHS) is throwing a shitload of fiat toward the energy sector; get your cut now before this carnival pulls up it's stakes too.......

Panhandlers are my indicator along with the state of cars going down the road. I know that many of the panhandlers aren't really broke, but they can function only because people believe that they are. Cars with obvious problems are a real tell too; I live on a busy road so I can hear when people have some types of car problems.

I have noted that as well, but what gets me are the cars that have paper DMV temp plates pasted in the rear window so you KNOW the car was just purchased in the last few days/weeks and yet the tires are bald and tons of blue smoke pour out the tailpipe when they take off from a light. Often you see cars now with personal possessions piled up to the roof, it is obvious people are living in them. I have been there and it really is sad. Doubly so when there are over 22 million vacant housing units in the USA. Someone owns all those vacant housing units, someone is rich enough to have multiple dwellings while millions are living under bridges and in cars, that is what I call immoral.

yesterday when I went to my local coin shop to buy a silver eagle, there was a guy in front of me who had bags and bags of silver coins, so many that the dealer just dumped them into his coin counter rather than hand count them. I saw a large bag of silver half dollars and another of silver Morgan and Liberty dollars and a couple dozen rolls of large coins. I asked the seller if that was his whole collection and he said, "yeah." He was about 60 maybe.

May be more people selling their gold/silver than buying it at the coin shops.

I would be curious if he is selling the silver while keeping the Cox Cable and the SUV. Or if he had already cancelled/sold all other services or items to sell.

People often sell off the items of the greatest value in order to support the consumption of other goods/services that have no real value whatsoever. But when the man who bought silver to KEEP it as insurance is in the pawn shop selling it, then that is quite an indicator.

Gully, eh? The Mexican government subsidizes the prices of tortillas and has a strict control on their price because for quite a large part of the population especially in rural Mexico, that is the only thing between them and stravation. When they reduced the supports people did riot, the subsidies were restored. Personally I think since the Catholic church is so active and fundamental to overpopulation and ignorance in Mexico they ought to be the ones paying the price supports for tortillas. There is a big difference between a tortilla and a taco or burrito though, don't be a borderline racist. Still, you get a green arrow for bringing it up.

It has already started. The student loan bill increased interest RATES, but decreased the PAYMENTS (as a percentage of income) that you will have to pay. Thus, you become more indebted, yet you make small payments in perpetuity, never getting out from under them.

However, the exemptions are growing. You think of the forgiveness as happening after the loan is taken out. But many of the priveleges are granted by issuing grants instead of loans to certain people in the first place. Those who take out the loans and are obligated to pay them do not include the students who have been pre-screened out of that debt system by being switched over to the entitlement programs for free money.

If these special students do have to take out student loans, they get subsidized interest rates lower than the rest of the student body due to their being "needy" or "underrepresented". Federal loans issued to "low income" have lower rates (e.g. reduction from 8% to 5% just for being "low income").

Ultimately, the student loan forgiveness will occur in larger scale, but only for certain people, and by stealth. They will likely do it in similar manner to the housing forgiveness programs, by giving banks a cut of the action to re-write the loan for the chosen few.

There was some statistic on the news tonight about increasing rates of default on student loans. They should be permitted to file for bankruptcy. The Fed's student loan program is unconscionable. Young people who may or may not get a decent paying job in the best of times are burdened with thousands of dollars of debt which take years to pay off when they should be saving for mortgage down payments or their 40lK or to fund their privatized and voluntary social security account. The student loan program also contributed to if not caused the outrageous rise in tuition which has occurred in the last 10 or so years.

You mean he's buying short sales (probably illegally) using his connections at a bank, ripping the taxpayer off, patching them up with substandard repairs, and selling them to desparate suckers that still believe real estate can only go up?.

He's probably buying vacant foreclosures at auction for cash. But other than that, you're spot on. House buyers who need financing can't compete at the low end with investors paying cash. Cheap houses usually have some damage and won't pass FHA required inspection, thus no loan.

Flippers are buying 100k houses, putting 15k of repairs in them, and selling for 175k. The 203k rehab loans were supposed to bridge the gap, and allow non-cash buyers to make their own repairs and save money. But AFAIK, those loans are impossible to get.

Complete and utter bullshit, The only guy claiming to be buying houses is the "flip this house guy" advertising on the radio wanting to find 20 qualified people at seminars to learn how to flip a house in your area. No more hummers on the street, seeing Dad's driving the kids to H.S., parents out joggin in the middle of the day, multiple 30 year old local fly fishing stores closing cause no business, empty ski slopes, and if your not paying cCCR's guys are cutting their own lawns.

I traded in my Viper last year out of fears of a coming crash and having an expensive toy sitting in my garage that I couldn't get rid of. I f-ing loved that car too, supercharged coupe.

I look at my parking garage and see how many spaces are available. Used to be a time when if you got there after 8:30 you had to park outside. Been able to take you pick of spots inside for a while now....

The average age of the check out clerk's at target. 4 years ago it was mostly students, now its guys in their 50's. And they are so so so polite, its like they haven't had a job in 2 years and are so happy to be working and so scared they might get fired, that they are the nicest guys in the world.

Yup, just as reported elsewhere on ZH, the employment rate of young people is at a 64 year low of 54%. Seniors must be taking up the jobs at low wages since they've been killed in the market and in their fixed income investments.

The train was my first sign in mid-2008. Previous to that time, the train was packed, standing room only, after that time, any seat you wanted, no standing needed. Then, as fares increased so Conductors could make $80k with ridiculous Ponzi Pensions, I switched to driving. What was once an hour-fifteen minutes is now thirty-five minutes, with Friday's being a little longer as people go further North on the weekends.

But MN is still building lanes all over the place in metro area and still pursuing more light rail. Unreal. Of course the roads are plastered w/ the "You can thank Obama at the voting booth for this lane" signs. (community reinvestment act signs)

Closely held Petco Animal Supplies Inc., PetSmart’s main competitor, now offers to give $5 back to owners for every $100 they spend under its Pals Rewards loyalty program. Photographer: JB Reed/Bloomberg

Liz Harper’s dog once dined on bowls of Mars Inc.’s Royal Canin tailored to the Boxer breed and packed with the heart-healthy amino acid L-carnitine. She’d wash it down with Bowser Beer, a dog drink brewed from malt barley and salt-free chicken stock. Today, Billie Holiday has to settle for kibble from the local Target Corp. (TGT) store.

“It’s probably worse than toxic waste, but she loves it,” said Harper, a 36-year-old attorney from Pelham, New York. “It’s cheap and way easier to buy than anything else. She’s a dog -- she eats out of the garbage can and drinks out of the sewer. She doesn’t need organic dog food.”

Harper is among a growing proportion of pet owners who are seeking bargains and shunning more opulent items such as $600 Swarovski crystal dog collars, according to researchers Packaged Facts and Mintel. The $87 billion pet-product market, once deemed recession-proof, is starting to show cracks as owners struggle to make ends meet.

Nearly four out of 10 U.S. pet owners in a September Packaged Facts survey said they’re spending less on pet products, up from 27 percent in February 2010. Three-quarters of them are looking for deals, particularly on non-food items like apparel and toys. The U.S. is the world’s largest pet product market, according to researcher Euromonitor International.

“The totally discretionary stuff is increasingly being cast aside,” said Lee Linthicum, head of food research at Euromonitor. “People still want to spend a fair bit of money on their pets, but they are reevaluating their priorities.”

Michelle Friedman, a spokeswoman for PetSmart of Phoenix, declined to comment on the company’s discounting practices. Strasser has a “neutral” recommendation on PetSmart, which offers a Martha Stewart-branded line of toys, apparel, and $120 dog beds. The company plans to report full-year results Feb. 29.

Closely held Petco Animal Supplies Inc., (PETC) PetSmart’s main competitor, now offers to give $5 back to owners for every $100 they spend under its Pals Rewards loyalty program.

“In America, you have to push harder to get people to spend,” Euromonitor’s Linthicum said. “There are similar factors in Europe as well.”

Smaller Pack Sizes

To cater to frugal consumers, some pet-food producers have borrowed tactics from human food-makers like Kraft Foods Inc., (KFT) reducing pack sizes to minimize the impact of rising ingredient costs, according to London-based Mintel. Prices for dog and cat food have increased nearly 10 percent since 2006, excluding currency fluctuations and inflation, Linthicum said. Americans’ disposable income has declined in each of the past five months.

Closely held Mars leads the $71.8 billion global pet food market with a 24.8 percent share, according to Euromonitor, followed by Purina maker Nestle SA, (NESN) with 23.9 percent. Nestle’s pet-care unit had organic sales growth of 4.3 percent last year, the slowest of the Swiss company’s five product groups.

Suppliers of pet services are also doling out deals. Leo Sanders, the owner of a grooming and boarding business in Corning, New York, offers one free day of pet daycare for customers purchasing a full week. Dogs under Sanders’ care romp around five acres of outdoor play space and relax to the strains of classical music.

‘Recession Flexible’

“Our industry is not recession-proof -- we’re recession flexible,” Sanders said. “People will still spend, but instead of frivolous spending on squeakers and rawhide bones, now they are reading labels and making sure it’s a quality product. And they’re asking for discounts more.”

Sanders, whose pet bulldog has its own Facebook page, said services like day care, boarding and grooming are now 75 percent of his total revenue, compared with several years ago when the majority of sales came from food, dog collars and apparel.

“Customers are going away from some of the pricier accessories and more to the services you can provide,” he said. “They are more willing to purchase a spa treatment than a leather collar studded with Swarovski crystals.”

Joanne Mahon, managing director of Diamond Dogs in the U.K., supplies just those collars to luxury department stores such as London-based Harrods Ltd. and pet boutiques in Manhattan and Laguna Beach, California, whose customers include Jennifer Lopez and actress Jessica Alba.

Swarovski-Laden Collar

Sales of Mahon’s items, which include a Swarovski-laden collar and leash pairing for $1,135, fell as much as 25 percent last year, she said in an interview conducted over the din of 10 new Saluki puppies. Buyers in Asia have helped pick up the slack, she said.

Mahon said some customers save all year to buy her products, which include bespoke beds that start at $3,100. One- in-six pet owners has cut back on other household expenses so as not to skimp on pets, Mintel has found.

Tighter household budgets have also had a “sobering effect” on pricey pet apparel, according to Joan Volpe, managing coordinator at the Center for Professional Studies at New York’s Fashion Institute of Technology. FIT sponsors a pet apparel fashion show, where this year 14 dogs will model nearly 30 outfits, from casual sportswear to evening ensembles.

“There has been a turn to practicality,” Volpe said by e- mail. “The seemingly frivolous items of just a few years ago like net tutus are no longer in demand.”

Pet Food Spending

Food, which makes up the biggest slice of pet expenditures, is the last thing that owners skimp on, according to Packaged Facts analyst David Lummis., who is based in New Orleans. A 2007 recall, when tainted ingredients were found in dozens of brands of Chinese-made pet food, sent panicked owners flocking to more- expensive suppliers. U.S. sales of pet food should reach $20.8 billion by 2016, up from $18.1 billion, Mintel estimates.

Andre Marin, a recruiter based in Arlington, Virginia, hasn’t changed the brand of dog food he feeds his mutt Rupert, who is sensitive to other foods, he said in an interview. He doesn’t bother with fancy collars or sweaters, though.

“Rupert is part Huskie,” Marin said. “These are dog’s dogs -- they chase deer. They’re not into the sweater thing.”